The fourth industrial revolution (Industry 4.0) is transforming the world we live in, with rapid advancements in technology. The trend towards automation and data exchange is creating new challenges and opportunities for business across the board – from global manufacturing giants to the smallest producers.
Swinburne’s Deputy Vice-Chancellor (Research and Development), Professor Aleksandar Subic, recently joined Siemens Chairman and Asia Pacific CEO, Jeff Connolly, to explain why Industry 4.0 may just be the most important economic and social topic for Australia. Here is the transcript of that event, moderated by Treasurer of the National Press Club, Tony Melville.
TONY MELVILLE: Thanks very much, Jeff. We’ll just start off with some questions and I’ll do the first couple and then will open up to our media members. But maybe just the first big question to you Jeff, you talked about a lot of the things that are happening with the business and the government, the collaboration standards, test labs and the 4.0 task force. So you also spoke of the German government’s leadership on it, and the Prime Minister coming in and getting involved. So do you think our government - and not just the federal level and state level - are doing enough and what could they do to really kick start it? Is there are a couple of big priorities you think that might move this to the higher level and break through into the public consciousness?
JEFF CONNOLLY: Yeah, thanks Tony. It’s a chicken and egg, like most things. I think Aleks and I decided pragmatically to get started in producing skills that we knew were going to be necessary. And curiously enough, once we built curriculum and we built test labs, people came and started to understand it and actually adopt it and say, okay, this is not so bad. And the initial resistance was gone. So education is a key part, but not seeing individual elements in isolation, but being more holistic. Those elements, those work streams that were set up by Germany is their approach. We don’t have to fill in the same content as another country. But I think the framework is relevant because it covers those critical parts that’s necessary to move industrial manufacturing, digitalised- industrial digitalisation forward to the future.
TONY MELVILLE: And the states and the feds getting together on this stuff?
JEFF CONNOLLY: There has been positive signs, I would have to say. Perhaps Aleks can say a little bit more about that. Certainly federally the current Education Minister has created forums, and they are state based contributors to how do we step that education piece forward. Most of the states have their own advanced manufacturing initiatives. I would like to see those a little more coordinated or at least structured in a similar way. But there is an awareness I think that manufacturing is one of the greatest contributors to economic wealth in the country.
TONY MELVILLE: Good. I’ll bring Aleks into- as I mentioned earlier, Professor Aleksandar Subic is the Deputy Vice-Chair of Research and Development at Swinburne University, who is passionate about these issues. Do you want to add to that? And I’ve got another question for you, the state government and federal government.
ALEKSANDAR SUBIC: Well I think we do need to acknowledge the bipartisan support for what we’ve been doing, because- and I think we didn’t leave much options of not allowing them to support us. I think we brought the ideas and we were very agile and forthcoming. But as Jeff mentioned, Mathias Cormann and the Department of Industry has basically supported our test lab- national test lab network development and the blueprint we put forward, as well as the task force. And more recently, in our state government, for example, Victorian Government has supported us to establish the state of Victoria SME hub for Industry 4.0 to help transform the SME ecosystem in the manufacturing sector in Victoria. So we are seeing support for concrete programs and concrete initiatives where the outcomes and the value adds the benefits are clear.
TONY MELVILLE: Okay. So question for you, Aleks. The business and university collaboration that’s all key to it as well as we’ve been hearing. And so what’s happening there? And are we seeing leaps and bounds with the university and businesses, and are there some strategies that you’re applying?
ALEKSANDAR SUBIC: I mean, that is one of the core areas of my attention, and one of the core areas of the taskforce attention from the very start, because we realise that this is a very complex ecosystem. If you’re going to achieve transformative impact across the industry, as well as across education and training and in society in general, all the elements of that ecosystem in this society have to work together. You know, it’s not one or the other, and it’s a very fragmented ecosystem at present and it requires a fair bit of effort to connect, to interconnect those and to actually play together to achieve that transformation. We’ve rolled out a number of pilots, and we’ll talk about that as we progressed through this through this panel discussion. Pilots in terms of programs in Industry 4.0, pilots in terms of test labs and industry hubs, and so on, and what we’re doing to scale up. All of that required all the parties to work together. But in particular, it required on one side the universities and training in education institutions to let the outside in. And that’s sometimes daunting for more traditional organisations. For those that have been set up by industry or by industrialists like Swinburne, it was a little bit easier but still not easy to do, because there’s functional and structural barriers you have to overcome. But also it’s not that easy for industry and business, because they are not used to doing that. Especially now ecosystem and- they need the encouragement and they need an opportunity to sit around the same table and co-design, which universities don’t often offer as an opportunity to industry and business.
TONY MELVILLE: Just on that last point, you talk about complex ecosystems, and so for a lot of businesses and particularly SME’s, they’ll look at this and they may well say, this is just too hard, too big. So what’s your message to them?
ALEKSANDAR SUBIC: It’s quite true. And that is one of the biggest obstacles, I think, all of us are facing if we are going to achieve transformational scale. We’ve been testing a number of initiatives which are providing a fair bit of learning for us, where we are trying out programs at hubs, clusters, that are large scale. So one of the principal reasons why we’ve established the National [indistinct] Industry 4.0 test labs one in Victoria at Swinburne, one in Western Australian, University of Western Australian, one in South Australian, University of South Australia, one in Queensland, University of Queensland, New South Wales, University of Technology Sydney, Tasmania, University of Tasmania. Each one, let me just explain the concept. Each one is about developing a major robust facility in the shape of a pilot plant, a fully operational Industry 4.0 pilot plant that meets the criteria of being true Industry 4.0. With cybersecurity, [indistinct] things, artificial intelligence, machine learning, full autonomy, all aspects integrated in a working operating system, and with teams that engage industry, education, and training, is a cluster in that transformation journey. From business model innovation all the way to delivering an innovative process that produces an innovative product. Each one of them aligned with a particular growth industry sector that are priority in Australia. Those six test labs will engage more than 200 companies as they operate, but together as a portfolio that is networked, are basically bridging those boundaries and bridging the gap between industry, business and education. And all of them had to focus on education and training across the entire lifecycle, from vocational education all the way to PHD graduates, which for some is easy, but for some of the G08’s that are involved in that construct, it’s hard because they don’t have a vet with infrastructure, and also that traditionally have never engaged with a vet.
So there is a lot of cultural change in that as well. And as you can see by design, we’ve actually disrupted the whole sector because we brought in some of the GO8’s, some of the ATN’s, some of the independents, where they also forget their own individual boundaries and their own individual kind of stigmas, and actually play together is a collegial network that is actually focused on only one thing, and that is achieving impact.
TONY MELVILLE: Jeff?
JEFF CONNOLLY: I think what Aleks is describing there is very profound. We intentionally chose one university per state to eliminate that natural competition, to attract students, but again, gave each of the universities some significant incentive to go down the path, to apply for Commonwealth grant to build a test lab, provided they put money in themselves, and also the encouragement that they really needed to go across the road and find themselves a local vocational education institution, TAFE primarily, and work with them. Can you imagine Uni WA, going across the road to Perth TAFE and saying: by the way, you can use this environment and we will we will do accreditation and training on the same tools that we’re using in Uni WA? Can you imagine how profound that is for a Group of Eight university? So it actually- what Aleks did was it was brilliant, because we actually eliminated the competition. And again, it wasn’t- it will build once we’ve got the standard there, but to get it started, to get the momentum going forward, that was the path we chose.
I just want to add, sorry, to your question - SME’s, and well, to say, yeah but that’s all fine for you, but I’m too small – it’s actually not the case. We’ve got a couple of great examples of SME’s, more mediums and of course small, micro distillers, micro brewers, there’s a company in the Sunshine Coast – HeliMods - that do digital twins of rescue helicopters and they fit out the internals for the taking of stretchers, and actually, they’re working on putting MRI into the helicopters, if you can imagine how difficult that would be to put an x-ray machine in a helicopter. But actually being able to simulate exactly what the consequences of what they’re doing in the configuration, and these are small firms, if not more than 20 people who are very clever graduates - in this particular case of University of Queensland, who are thirsting for those sorts of skills, for people to be creative on those design tools, simulation tools that we’re describing in Industry 4.0.
TONY MELVILLE: Interesting. We’ll open up questions to the floor now and our media members.
And starting with Tim Shaw.
QUESTION: Thank you, Tony. Tim Shaw, gentlemen, National Press Club director. Thank you both so much for your address. I want to draw you to the recommendation 7 in the Transforming Australian manufacturing report. Continue to remove the barriers between vet and higher education in Australia’s tertiary education, you both touched on that now. Here in Canberra, we celebrate the great achievements of Seeing Machines, Aspen Medical Canberra data centre. These were small and medium enterprises right at the beginning. And a small hub, if you like, Canberra, which I noted was excluded from the academic hubs that you referred to there. Do we need to break down the silos even further? Minister Cormann is happy to invest in Canberra data centre. We’ve seen enormous growth in achievement. But where are the industries that we need to truly target? And as part of that COAG process that Tony touched on there, do we need to be more specific about what the objectives are from a national perspective, both from a business point of view and from an academic break down the silo point of view?
ALEKSANDAR SUBIC: I’ll start. Thank you, Tim. That’s a very important- it’s a critical question. I recognise that there are a number of committees and groups that are looking at this issue because it is an essential issue. At the moment there’s also the Australian Quality- Qualifications Framework review as well, which might produce some outcomes in this regard.
But the question of blurring the boundaries, you know, across the ecosystem and allowing that seamlessness across the whole lifecycle of education and training is critical to meeting the needs, in my view, industry and business going forward in the future, but also meeting the needs of the general population - not just young people. Those 60 year olds that are in jobs right now that also need to transform, because I don't subscribe always to this term - the future workforce. What about the current workforce that we need to transform? So there's workforce transformation, there’s upskilling, there's reskilling, and so on.
For that to be effective and timely and more agile, we need a system that's interconnected where we move seamlessly through that lifecycle, where people move in, move out, move in, move out as the education and training needs occur at various stages of their work, at various stages of their careers. That requires of us to have an integrated education and training system that actually makes that easy, that qualifications are transferable, that the standards are clear, that recognition is very clear, and that they know that that applies to micro credentials as well. You know, for that uptake to happen, people need certainty in terms of quality assurance, in terms of recognition, in terms of how that adds up. There's a lot of work to be done, but those boundaries, those boundaries must be blurred. It must be a more interconnected, seamless ecosystem.
JEFF CONNOLLY: Thanks for the question, Tim.
We have defined several years ago, in the face of picking winners, the picking winners argument - you know, should government support one industry or another - we defined areas of comparable advantage that we would work on. I think there were five growth centres, and then there was the enabling one, advanced manufacturing. I actually believe in the approach because I don't think an economy of our size can be all things to all industries all at once. If you pick those ones that have got the biggest critical mass, what you’ll find actually is that the skills and the learnings from those will also be applied in other industries, particularly if you develop the manufacturing capabilities and research parts that are the enablers for those industries.
So my response, I guess, to part of your question would be: we shouldn't walk away from concentrating our efforts in certain areas and hoping that that multiplies out into other areas.
TONY MELVILLE: Next question’s Nic Stuart.
QUESTION: My editor has always said that it's really not a matter of AI - getting any form of intelligence involved in my column would be a significant leap forward.
QUESTION: But I naturally disagree with him. You would be aware, of course, of the Harvard Review, which has this week said that Australia isn't transforming goods, it's not an intelligent society. You yourself drew that brilliant example of the VFT, the Very Fast Train, which I remember reporting on years and years ago when I was young, if you can imagine back that far.
What do you think is going to change? We're here today - admittedly Parliament's sitting up the hill, but to my observation there's no politicians who are actually present in the room, and that indicates a lack of awareness, a lack of willingness to grapple with the real future.
And secondly, Aleks, can I ask you particularly about- we have a very rigid university structure. To what extent does this rigidity, the silos that Tim was talking about, actually militate against achieving what you're trying to do? I mean, we were talking earlier about journalism schools. You know, now you can't begin a journalism degree without actually having a journalism qualification from a university. There's all this credentialism. To what extent does that actually present a barrier to achieving new things in a new environment?
JEFF CONNOLLY: Quite a lot of questions in that one. Perhaps a couple of comments. You're referring to this this commentary in the Fin Review that was talking about Australia get- is dumb and getting dumber, on learning to be lazy as a consequence of the mining resources. As I tried to say, I think the world will open in both directions. That we will be able to export skills out, provided we've got them - engineering type skills - but we'll be subject to the incoming challenges of other people wanting to sell into our markets.
So a double edged sword. I think there's an opportunity there, but we have to run fast.
That the ministers are not here doesn't concern me because I know actually there is an interest from Minister Andrews. There's certainly an interest from Mathias Cormann to spread further the concept - not that the Finance Minister necessarily would be involved in those decisions directly - but it came out of out of the Australian-German advisory group. So there's an awareness. I know the Education Minister has formed subgroups at the moment looking at this question: how do we change the outcomes or incentivise universities to produce something that we, society, want right now? And that's not just a static output independent of what's happening in the economy at a point in time.
How do we change it further? The White Paper that was written by the Germans when they first conceived this talked about accelerating the journey via lighthouse projects. So your procurement policy needs to say: after I have built the submarine, I need to have more than just a submarine. I need to have the skills uplift, and it actually needs to be described in and amongst the specifications and the outcomes that are required of the contractors. So there's some work to be done there and I know around the states there's some discussion on how that would be implemented.
ALEKSANDAR SUBIC: I might continue with your second question. I think you're right. I mean, I share your view that that our system and tertiary sector, as well as the universities, could be more flexible and should explore new models and should be open to that innovation in that regard, and I think it has to happen quicker. I don't know how many of us here would agree that the university of the future would look like the university today. Is that realistic to expect? I don't think so, because the model is more or less the model that's been developed in the previous century, with the changes that have been happening slowly but in an incremental fashion and primarily through funding model changes.
So that needs to change while maintaining the quality, the rigor, the credibility so that the society maintains trust in the system because of that independence and the expertise and the rigor that we have. So trying to achieve that in that context I think is where we need to go. That's why we are testing a number of models through these pilots.
So when we developed The Factory of the Future, you know, to create a hub for the SMEs or the pilot program with Siemens and Australian Industry Group in Industry 4.0 as the first diploma program to offer nationally in situ, but using Siemens as a cluster, but bringing the supply chain together so that actually the workforce that’s the first cohort is actually the workforce that will seamlessly transition into the supply chain.
Through all of those models, we are actually experimenting how we can change ourselves because we have to be prepared to change ourselves, because we are also being disrupted as an integral part of the society. And I think the successful universities of the future will be the ones that through innovation are able to transition into new models, but that also maintain that independence, rigor, quality and so on.
Just on your first question, because they’re in a way connected, because it's the two elements of the ecosystem changing. I don't know how many of you know the metaphor of the falling whale, you know, there’s this metaphor of the falling whale when the whale reaches the end of their life and they slowly start sinking, slowly. As they sink to a new level, all these water creatures and animals start eating it away, you know, biting and taking it away and growing something new. As it falls down ultimately to the end, to the bottom of the sea and it's dead, there's a whole new ecosystem created, you know. Is that something that we are going to witness here with the resources industry the next 50 years and the new ecosystem created?
What we are trying to do is we're trying to actually fast track our transformation using the fourth industrial revolution as the catalyst. And Jeff was quite right in his opening remarks in his speech, that ultimately this is really not just about technology. It's about society transformation and about creating the society of the future that we want to be. And you're right, your question is absolutely right - the education and training sector, the business sector, all of us will transform and all of us have to be ready to innovate, look in and change ourselves. But that change won't happen by us looking inward and doing it just ourselves. It will happen hopefully by us working together and co-creating.
This is why we've let the outside in. You have to let the outside in. I usually say that, and that’s industry, business, community, society because through that, you actually look for new models because ultimately we are there to meet the needs of those stakeholders.
TONY MELVILLE: I think if I can comment, Nic. Nic's Industry 4.0 as well. He told me some months ago when he'd written a defence column: oh, there's 25 people reading that story in the Russell offices right now. And he could see that online, you know. So, the media adjusts to the technology as well.
I might just jump in with a question on the older workers - no reference back to Nic. But the older workforce is growing in size and significance globally, and this is one for Aleks. So how- you know, we've seen the automotive industry shut down in- all over the place but those workers being replaced. So how can we best draw on that talent and experience of all the workers in this Industry 4.0 context?
ALEKSANDAR SUBIC: And that was part of- one important part- thank you for asking that. That was one of the important parts of my answer previously. You will find, and I think we've seen that information in recent times through Innovative Manufacturing CRC or Manufacturing Forum and Statistics Bureau, that last two years we've actually grown by about 85,000, 100,000 jobs in manufacturing, while previously over 10 years we dropped by 100,000. So something's happening there, the ecosystem. And they are not the workforce of the future. These are the people coming out of the automotive sector and many of the other sectors that are transforming, closing or leaving, and actually innovating and creating new enterprises or collaborating, working together to create new enterprises in manufacturing.
There's enormous talent there. And our biggest fear when automotive industry was closing in terms of manufacturing and assembly was that we will lose that capability. That's why there's such a kind of a fast tracking of pilots and our fast tracking of initiatives that all of us are collectively implementing, including federal and state government, to maintain that talent pool, that experience, decades of experience. So the hubs we've created like the one in The Factory of the Future at Swinburne or across the test labs also aim to bring that talent. We’re actually also employing those people, creating teams that will be actually interfacing with industry and so on, and many of them actually starting their own businesses or collaborating to start businesses in a collective manner.
And it's that innovation that's actually allowing us now to actually start growing the manufacturing jobs despite all the odds, which is a positive mark. So our focus on workforce transformation is on that. So the report that Tim mentioned that we've developed together with PwC but also with Siemens, Swinburne, and the Australian Manufacturing Workers Union - as the largest union - was really about identifying best practice and also the learnings from best practice that can inform not just education and training but also business and industry and government on what kind of programs, incentives, and schemes can help transform the workforce in current industry more effectively, in a more bespoke manner, so that we maintain that talent because they have enormous experience, and use their talent in a different setting within different skill set.
TONY MELVILLE: And the next question’s from Michelle Price from AustCyber.
QUESTION: Hi, colleagues. Obviously cyber security is a really big component of this. We hear a lot about the threat side of things. I think that unlike Industry 4.0, cyber security has received a lot of attention but from the negative side of things over the past couple of years, which does create the opportunity for us to talk about the growth side of the equation. I'm interested in both of your views around how cyber security and cyber resilience into Industry 4.0 is almost like a match made in heaven for exponential growth.
JEFF CONNOLLY: I'll start the batting. Yes, of course. The Germans actually, interesting enough, in their work stream call it network security because it's trying to contain it into the industrial Internet environment of manufacturing - well, maybe expand out to process industries. But it's consistent with the rest of the speech on the sorts of skills that we imagine are going to be necessary in the near future, a) to protect ourselves but b) to generate new jobs.
Yours is a growth centre by definition, I guess. The traditional definition of the growth centres was we've already got something of comparable advantage. In your case, it was something that we want to have a skill set in to be able to export, and I think that's absolutely right. I was thinking just a few moments ago you were talking about what are the applications in new technologies other than the existing growth centres. The Chief Scientist Alan Finkel’s been talking about ushering in hydrogen, and Aleks and I have already been having a discussion about couldn’t you imagine a university with a net zero ambition building solar, having an electrolyser there, and then building curriculum to operate in that well, which will come.
ALEKSANDAR SUBIC: [Talks over] A living lab.
JEFF CONNOLLY: It will come. And what are all the things associated that, that you build curriculum at based on a vision of what's going to happen in the future. That's quite exciting, I think, Aleks.
ALEKSANDAR SUBIC: And Michelle, what you mentioned is I think we should say that all research and reports show that the manufacturing sector is in the top three sectors that are exposed to and disrupted or potentially disrupted by cyber attacks and being cyber vulnerable. I think this is why we've pushed also within the industry for zero qualification criteria, that every test lab must also address the cyber by design, the cyber protection by design, you know, from system point of view as well as from each technological element point of view, because the machines have to have that ability as well in a smart machine kind of a learning process.
So that is an essential ingredient. It's not an option, it's not extracurricular, and it has to be done by design, as you frequently say, and not as an afterthought. So for the manufacturing sector, which we are primarily talking about, it has now really I think been established, or we hope it will be established as a critical technology just like standards or any other element within the Industry 4.0 platform.
TONY MELVILLE: And our final question is from Misha Schubert.
QUESTION: Hi, gentlemen. Misha Schubert as the director of the National Press Club but declaring, for the record, my other hat for Universities Australia. I wondered if I could ask you to both give us a few thoughts on R&D investment and the level of investment. The ABS latest data out last month told us that whilst OECD countries, on average, are investing sort of 2.38 per cent of their total economy in R&D, Australia is now at 1.79 per cent. So, well behind that average figure across those advanced economies.
How concerned are you about the overall level of investment in R&D? And if you are concerned about it, what should we be doing about it to lift that level of investment?
JEFF CONNOLLY: That's your area, Aleks.
ALEKSANDAR SUBIC: I's a very important question, I think, because we sometimes tend to speak about innovation within this country disconnected from research and development, but actually it's research-led innovation and you can't have high impact innovation that's of global significance without actually high impact research that's the catalyst of that innovation. So, I think it's an essential question. And thanks, Misha.
But I have two views about that because I think there's two things that are very important there. Coming from an institution where I've been driving the strategy, as of last year 63 per cent of all of R&D external income came from industry and business because very early on in the strategy, we've learned that we can't wait on government or just rely on government or expecting that the government kind of investing in our research alone. So we've put a very elaborate strategy that’s focused on impact-oriented strategy of working with industry, business community and that brought us to 63 per cent of income coming from industry and business.
From that perspective, I know we can do more. I know that there's a potential and capacity there. But actually, we have to be able to convey a compelling value-add proposition to industry and business and I don't think that universities frequently do that. I think they frequently engage in an activity of developing some amazing solutions and then go off and look for problems to those solutions. We have to focus on understanding the business, industry and community needs and we have to be able to propose compelling value propositions that actually can be addressed through high level or high quality research. I think there's a whole developing maturity that has to happen.
On the other hand, I do also agree. And when we look at OECD results, let's say 2017 OECD reports, we’re among the lowest in terms of public- private sector investment in R&D as a country. That has to go up. But the problem is- it's an interesting problem and we have to contextualise it. Ninety-five per cent of the manufacturing sector are SMEs of 20 employees or below. They are fighting to survive.
So for us, the main prerogative must be that we build our capability and our standards and the technology we work on to a level in innovation, to a level that allows us to integrate with global supply chains, whether directly or whether working with global players like Siemens and others. Integrating in global supply chains is not an option. For us, it's a prerogative because that's the main way we're going to grow SMEs, select SMEs to medium and large. With that, the investment in research will grow.
So, we have to look at the context, the ecosystem we are in and where the funding can come. I think that we probably can also use the R&D tax concession scheme as well more effectively and we need to look at that as well and whatever's there available to actually incentivise that.
TONY MELVILLE: Final word, Jeff?
JEFF CONNOLLY: No, I'll leave it there. I think Aleks knows more about research - other than to say from an industry point of view, of course we've got an objective in mind when we work with a university on a research project. It can't be just to hand over the money and have an outcome that's not specific to the need. Siemens has its own R&D expenditure of about AUS$6.5 billion a year and typically, what's happening in that research spend is that we will go around the world looking not for an institution, but for a specialist who's the thought leader in that particular node of an overall project. And those R&D teams are actually put together in a virtual basis on specific individuals. And I think that's quite a different challenge for the way we've always seen a room full of white coat researchers trying to do from end to end on a single project.
TONY MELVILLE: Well, thanks for that. I think the discussion didn't live up to the hype and peril warning we had. The frog does die in the end in the boiling water, I should say, as we mentioned.
JEFF CONNOLLY: Or the whale.
TONY MELVILLE: And the dead whale. So- and that's a warning to us all.
And so, please thank Aleks Subic and Jeff Connolly.
Transcript produced for THE NATIONAL PRESS CLUB OF AUSTRALIA by ISENTIA.